How Tax Changes Affect Newcomers

With the federal government's new tax cut, Canadians earning between $45,282 and $90,563 will see taxes drop from 22 per cent to 20.5 per cent.Photo Credit: Alan Cleaver via Flickr Creative Commons

by Sukaina Jaffer in Toronto

A tax cut introduced by the new federal government looks to strengthen the middle class, but some Canadian immigrants disagree about how it will help newcomers.

The new change will provide about $3.4 billion in tax relief to nine million individuals, according to Stéphanie Rubec, a communications officer from the Department of Finance in Ottawa.

Canadians earning between $45,282 and $90,563 will see taxes drop from 22 per cent to 20.5 per cent.

Single individuals who benefit will see an average tax reduction of $330 every year. Couples that benefit will see an average tax reduction of $540 annually.

A mixed bag for newcomers

Rida Zeeshan and her husband, who works as a senior analyst at CIBC Mellon, emigrated from Pakistan six months ago. They see both advantages and disadvantages to the changes.

“The government here gives more benefits to people.”

“[It’s] a good move for middle-class families who are earning above $45,000; however, it won't help lower-class families because tax rates for [the] first taxable income threshold ($45,282 or below) haven't changed at all,” Zeeshan wrote in an email interview with New Canadian Media.

According to Canada Revenue Agency’s most recent tax-filing data and income statistics for the 2012 tax year, around 66 per cent of people had income below $45,000. This group would not benefit from the tax cut.

Although she says the benefits of living in Canada are much better compared to Pakistan, Zeehan says there is no clear information available specifically for new immigrants.

“There should be a website or printed brochures that describe benefits available to new immigrants.”

Zeeshan mentions that they do not utilize any government benefits. They took advantage of just one when her husband bought professional attire through an employment centre.

As for Basim Al-Ali, who relocated from Dubai to Canada in 2011, he says he feels the taxing system in the country is fair. “The government here gives more benefits to people.” Al-Ali mentions that in Dubai, non-nationals do not pay tax.

Syed Furqan Zaidi, an inventory controller in a manufacturing company, says that by paying his taxes regularly here, he is able to take advantage of the government’s benefits, such as the child tax benefit, GST/HST premium benefit, universal childcare benefit and the Trillium benefit. He moved from Pakistan to Canada three years ago.

Volunteer tax clinics, like the one at Northwood Neighborhood Services in Toronto, are available help people complete their tax forms.

The government also intends to introduce the Canada Child Benefit – a tax-free and more generous benefit to help families raise their kids.

Faheem Mazher, a senior tax analyst with Deloitte LLP in Toronto, says that this benefit will help families for a longer time than the previous Universal Child Care Benefit (UCCB).

In addition, the government plans to repeal income splitting for families with children. Zeeshan says this is “not a good move because this was the only tax relief available to lower-class families, which has now been relinquished.”

Tax benefits

For newcomers to Canada to be able to access benefits, income tax forms must be filed. Volunteer tax clinics, like the one at Northwood Neighborhood Services (NNS) in Toronto, are available to help people complete their tax forms.

“In a year we serve an average of 400 people whom we help to file income tax returns,” says Francois Yabit, executive director of NNS, a non-profit organization running for more than 10 years.

This service is provided for low-income community members who qualify and assists a diverse clientele of Chinese, Spanish, South Asian and African newcomer Canadians.

The organization offers income tax clinics from March to April by appointment. However, during the year, they offer services to those who face problems such as forgetting to file their tax forms on time.

“If you do not file tax forms, then you cannot get benefits from the government,” says Yabit.

While the new tax cut is set to benefit the middle-class population, it still may not help many immigrants who are struggling to make ends meet in low-income jobs.

But to ensure that one is eligible for such benefits, Mazher says newcomers need to be “transparent” and to “not cheat the system in any way, shape or form” because the Canada Revenue Agency (CRA) can enforce heavy penalties.

In addition, Mazher points out, “Many newcomers don’t realize that they have to pay taxes on overseas income.” This may include property overseas or accounts, stocks, investments and bonds that are generating interest.

Tax-filing for newcomers

Mazher advises newcomers to retain their receipts, transit passes and donation receipts and to file their taxes even if they have no income so they can get tax credits to carry over.

He also recommends people to retain their receipts for six years in case of an audit by the CRA.

“It is essential that tax forms be filed by the end of April or one can accrue penalties and interest from the CRA,” states Mazher.

But while the new tax cut is set to benefit the middle-class population, it still may not help many immigrants who are struggling to make ends meet in low-income jobs.

Zeeshan has a couple of suggestions for ways the government could help those who may need a little more support.

“We think the government should also introduce a tax relief or discounted tax rates for new immigrants living in Canada for two years or less,” she says.

“This will help them to decrease their expenses and to get settled here quickly.”

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